U.S. Home Price Growth Gains Strength in August

Home price growth was strong in August, according to a report released Tuesday, underscoring that the market has momentum going into the final months of the year. The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.7% in the 12 months ended in August, slightly greater than a 4.6% increase in July. The 10-city index gained 4.7% from a year earlier, compared with a 4.5% increase in July. The 20-city index gained 5.1% year-over-year compared with 4.9% a month earlier. Economists surveyed by The Wall Street Journal expected a 5.1% increase in the 20-city index. Eighteen of 20 cities across the country reported increases in prices month-over-month before seasonal adjustment. The hottest markets in the country continued to show sharp price gains during the final month of the summer selling season, with San Francisco and Denver recording the only double-digit increases in prices in the year ended in August, both gaining 10.7%. They were followed by Portland, Ore., where prices rose 9.4% over the year. Month-over-month price gains remained modest. Not seasonally adjusted, the U.S. Index rose 0.3% from July to August. The 10-city index and 20-city index rose 0.3% and 0.4% respectively over the month. After seasonal adjustment the national index was up 0.4%. The 10-city and 20-city composite were both 0.1% over the month. Case-Shiller offers a delayed picture of how the housing market is faring. More recent indicators of the health of the housing market largely have been strong, with some notable weak spots. Sales of previously owned homes increased sharply in September, climbing 4.7% to a seasonally adjusted annual rate of 5.55 million, the National Association of Realtors said last week. But on Monday, the Commerce Department said that new home sales tumbled 11.5% from August to September. Given the low inflation rate in the economy overall, the fact that home prices are growing by nearly 5% is an even more telling indicator of the housing market's strength, said David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices. "The rebound from the recent lows was faster than the 1997-2005 housing boom, and also much less driven by inflation," Mr. Blitzer said. Still, economists are concerned the housing market won't continue to sustain price increases given that incomes aren't even close to keeping pace. In particular, high home prices appear to be keeping younger buyers from entering the market. Write to Laura Kusisto at laura.kusisto@wsj.com